The Department of Health and Human Services (DHHS) Office of the Inspector General (OIG) posted an advisory opinion on June 1, 2012. In the advisory opinion the OIG concluded that two different arrangements between an ambulatory surgical center (ASC) and anesthesia services provider could result in prohibited remuneration under the federal anti-kickback statute and lead to administrative sanctions and criminal sanctions.
To view OIG Advisory Opinion 12-06, click here.
Advisory Opinion 12-06 was issued in response to a request submitted by an anesthesia practice (the Requestor) regarding two different proposed arrangements. The Requestor stated that it was pressured to sign up for one of the two arrangements to stem the flow of lost business.
The Requestor is the exclusive provider of anesthesia services to several ASCs. The Requestor believes that the ASCs were formed and operate in compliance with the ASC safe harbor to the Anti-Kickback Statute (42 C.F.R. § 1001.952(r)). Under the existing relationship, the ASCs bill and receive payment from Medicare both for surgical procedures and integral ancillary items and services. The Requestor bills Medicare and patients for professional services, which are not included in the payment to ASCs. The ASCs’ physician-owners also bill for their professional services, and charge a "facility fee” for the materials and ancillary staff required to operate the ASCs.
Proposed Arrangement A.
Under Proposed Arrangement A, the Requestor would begin paying the ASCs a per-patient fee, excluding Federal health care program patients, for "Management Services." "Management Services" include paying for space and paying for the services of ASC personnel to transfer billing documentation to the anesthesiologist's billing office.
Proposed Arrangement B.
Proposed Arrangement B closely resembles a "company model" arrangement. A company model arrangement is when a referring physician, who generally also owns the facility where surgical procedures are performed, forms a separate anesthesia company in order to share the revenue. The physician-owner then contracts out a substantial portion of the operation.
Under Proposed Arrangement B, the ASC physician-owners would establish subsidiary anesthesia companies. The Requestor would be brought on as the sole independent contractor to provide anesthesia services. The physician-owners would pay the Requestor a negotiated rate and roll the profits back into the ASC.
OIG Concludes that Proposed Arrangement A Presents Problem Under Anti-Kickback Statute.
The OIG concluded that both arrangements posed regulatory concerns.
Regarding Proposed Arrangement A, the OIG decided that the arrangement presents a risk of a violation under the Anti-Kickback Statute. The Requestor could be overpaying the "Management Services" fees to induce the ASCs to refer all patients, including federal health care program patients, to the Requestor. The OIG also noted its long-standing concern that payments for non-federal health care program business may disguise remuneration for federal health care program business.
Additionally, the OIG determined that the "Management Services" covered by the fee are included in the facility fee paid by Medicare. The ASCs would essentially be paid twice for the same services. Therefore, the "Management Services" fees paid by the Requestor could influence the ASCs to select the Requestor as their exclusive provider of anesthesia services.
Proposed Arrangement B Does Not Qualify for Protection under the ASC Safe Harbor.
The OIG concluded that the subsidiary's income generated under Proposed Arrangement B could not qualify for protection under the ASC safe harbor. The ASC safe harbor protects returns on investments where the investment entity itself is a Medicare-certified ASC. This means that it operates exclusively for the purpose of providing surgical services to patients. Because the subsidiaries would provide anesthesia services, they could not qualify as ASCs for purposes of the ASC safe harbor.
Lack of compliance with a safe harbor does not necessarily result in a violation of the Anti-Kickback Statute. However, the OIG concluded that Proposed Arrangement B would pose more than a minimal risk of fraud and abuse. The OIG noted that arrangements (such as joint ventures) between parties who can refer business (i.e., the ACSs’ physician-owners), and those furnishing Medicare-payable items or services (i.e., the Requestor) are suspect. The OIG is concerned about arrangements where much of the joint venture’s business is derived from one or more of the joint venturers. Click here to view the OIG’s 1994 Special Fraud Alert on Joint Venture Arrangements. Click Here to view the OIG's 2003 Special Advisory Bulletin on Contractual Joint Ventures.
The OIG determined that many of the elements of suspect joint venture arrangements identified in its 2003 Special Advisory Bulletin were present in Proposed Arrangement B. The suspicious elements include the fact that:
- The ASCs’ physician-owners would be expanding into a related line of business (anesthesia services) that would be wholly dependent on the ASCs’ referrals;
- The ASCs’ physician-owners would not actually operate the subsidiaries, but would contract out the operations exclusively to the Requestor; and
- The ASCs’ physician-owners would have minimal business risk because they would control the amount of business they would refer to the subsidiaries.
Health Providers Should Be Cautious of "Company Model" Arrangements.
The Advisory Opinion's conclusion was that the proposed arrangements could potentially generate prohibited remuneration under the anti-kickback statute. The OIG could then potentially impose administrative sanctions. Therefore, if you are considering potential ventures that resemble a "company model," obtain a legal opinion from an experienced health law attorney on the legality of the arrangement.
Contact Health Law Attorneys Experienced with ASC Arrangements and Joint Ventures.
The Health Law Firm represents ambulatory surgical centers (ASCs) and other health providers in setting up corporate structures, joint ventures, and arrangements with other health services providers.
To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at http://www.thehealthlawfirm.com/.
American Society of Anesthesiologists. "HHS Issues Advisory Opinion on the Company Model." American Society of Anesthesiologists. (June 1, 2012). From: http://asahq.org/For-Members/Advocacy/Washington-Alerts/HHS-Issues-Advisory-Opinion-on-the-Company-Model.aspx
Bradley Arant Boult Cummings LLP. "Putting ASC Anesthesia Models Under: OIG Issues Unfavorable Advisory Opinion on Anesthesia Services Arrangements for Physician-Owned ASCs." JD Supra. (June 11, 2012). From: http://www.jdsupra.com/post/documentViewer.aspx?fid=eee44b4f-5362-405c-b378-f13c52dab756
Dunphy, Brian P. and Karen S. Lovitch. "OIG Advisory Opinion 12-06 Disapproves of Proposed Arrangements Between ASCs and Anesthesia Services Providers." National Law Review. (June 10, 2012). From: http://www.natlawreview.com/article/oig-advisory-opinion-12-06-disapproves-proposed-arrangements-between-ascs-and-anesth
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. http://www.thehealthlawfirm.com/ The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.